Indian equities outperformed the top 10 global markets in terms of gains so far this year on the back of robust macroeconomic fundamentals and funds flow from foreign and domestic institutional investors as Dalal Street bulls braved headwinds like higher interest rates, geopolitical tensions, and volatile crude oil prices.
The fifth largest economy stayed firm as the fifth most valuable market with a capitalisation of $4.16 trillion, marking a 24.8 percent surge over the previous year, the sharpest rise since 2021 and the fifth straight year of growth.
In 2023, the Sensex and the Nifty jumped 17.3 percent and 18.5 percent, while BSE MidCap and SmallCap indices surged 43 percent and 46 percent.
US stocks rally, China drags
The US market, leading with a valuation of $50.35 trillion, rallied too with a 22.61 percent expansion, as the Fed rate fears abated, inflation cooled off, and the job market continued to be resilient. Its Dow Jones Industrial Average (DJIA) gained 12.8 percent through the year.
China, the second largest market at $10.57 trillion, saw an 8.81 percent fall in 2023, as the Chinese economy struggled with a property crunch and a slow recovery from Covid-19. China’s Shanghai Composite (China) fell 5.7 percent in 2023.
Read: Tax outflows push banking system liquidity deficit to highest in over 7.5 years
Among other Asian markets, Japan's market cap increased 11.6 percent to $6.09 trillion, while Hong Kong suffered a loss of approximately 12.6 percent, falling to $4.56 trillion. The Hang Seng lost 17.4 percent so far in 2023.
In Europe, France surged 13.77 percent to $3.27 trillion, and the British market grew 5.3 percent to $3.07 trillion.
Saudi Arabia, Canada, and Germany posted rise in market capitalisations by 13.1 percent, 6.63 percent, and 12.25 percent, respectively, reaching $2.97 trillion, $2.89 trillion, and $2.39 trillion.
Indian market rides on bullish economy
India’s strong performance, supported by a strong economy, has lifted the nation’s contribution in global market capitalisation to 3.77 percent in 2023 so far from 3.4 percent last year.
The first half of FY24 saw GDP growth at 7.7 percent, driven by strong performances in the manufacturing and investment sectors. This prompted the Reserve Bank of India (RBI) to revise the FY24 GDP forecast to 7 percent. For FY25, the RBI projects a 6.5 percent average growth in the first three quarters.
These optimistic GDP projections support analysts' bullish stance on the market, backed by a robust high-frequency data such as GST collections, auto sales, power demand, and manufacturing and services growth rate.
Read: India's current account deficit narrows to $8.3 billion in July-September
Corporate earnings in the first half of FY24 stood strong, with Nifty companies reporting a 30 percent growth in on-year net profit. Analysts at Motilal Oswal anticipate a Nifty EPS (earnings per share) average growth rate of around 20 percent for FY23-25, possibly leading to further market re-rating.
The Bharatiya Janata Party’s triumph in Rajasthan, Madhya Pradesh and Chhattisgarh elections has significantly boosted the investor confidence in political stability after the 2024 Lok Sabha elections.
Investor sentiment was already positive due to strong corporate earnings growth and resilient domestic macros, and this victory is expected to further strengthen the outlook. According to analysts, this bodes well for India's macro and policy momentum, especially as the country exhibits the highest growth among major economies in both GDP and corporate earnings.
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